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Offset Mortgages
Offset mortgages are all about saving you money.
Offset mortgages allow you to link your mortgage to your savings,
the saving balance is used to bring down the amount of interest charged on the mortgage.
the saving balance is used to bring down the amount of interest charged on the mortgage.
OFFSET MORTGAGES
Offset mortgages are all about saving you money. They can do this in one of two ways – You could reduce your monthly payments, or shorten the term of repayments meaning you become mortgage free much sooner.
Unfortunately, as there are not a huge number of providers, a considerable number of people may not even know they exist, let alone realise the potential for savings.
How do offset mortgages work?
Offset mortgages allow you to link your mortgage to your savings, the saving balance is used to bring down the amount of interest charged on the mortgage.
Simply put, the amount of savings you have is ‘offset’ against the balance of your mortgage meaning you only pay interest on the amount left once your savings have been deducted. Your savings are not actually paying any of your mortgage but sits with it to save you the interest.
With an offset mortgage you can then either choose to reduce the length of time you have left on your mortgage while keeping your payments the same, or reduce them and pay less each month.
There are many misconceptions regarding offset mortgages so we aim to dispel some of those for you.
- A little goes a long way – £2500 could take 7 months off a £100,000 25 year mortgage
- Your money is always accessible, it is not locked to the mortgage in any way
- Interest rates are not always much higher, like all financial products, there are competitive rates so always shop around
When your savings are offset against your mortgage, you can still add more funds if you need to. Unless you have an incredible saving interest rate you may want to consider this as the more you have offset, the more you will ultimately save on your mortgage.
Some offset mortgages allow you to overpay, in effect doing the same thing – Saving you interest. This way you are repaying your mortgage so you cannot release these funds again easily if needed. Offset on the other hand remain alongside, so you will always have instant access to it.
Advantages of an offset mortgage
- Earn more on your savings than a standard savings account
- Interest savings are tax free
- Repay your mortgage sooner or make lower monthly payments
- Easy access to funds at all times
Use our calculator below to see how you could save and then get in touch to discuss it further.
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